RESIDENTIAL DEVELOPMENT INDUSTRY ACTIVITY SURVEY URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA NOVEMBER 2020
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RESIDENTIAL DEVELOPMENT INDUSTRY ACTIVITY SURVEY
URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA
NOVEMBER 2020
RESIDENTIAL DEVELOPMENT INDUSTRY ACTIVITY SURVEY URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA - NOVEMBER 2020Background
In September 2020, the Urban Development Institute of Australia (UDIA) lodged a submission with the
Commonwealth Government seeking an extension and redesign of the successful HomeBuilder scheme.
The submission recognised the value the Scheme is providing in sustaining Australia’s economy and
residential construction sector through the early phases of the pandemic, but also highlighted research
from Urbis that presented forward-looking forecasts resulting from low population growth projections
influenced significantly by a drastic decrease in net overseas migration (NOM).
The submission made an economic case for an extension to HomeBuilder – given the industry contributes
7.5 percent of the nation’s economic output and directly and indirectly generates over 750,000 jobs – as
well as a series of recommendations designed to maximise its value.
In our submission from September, UDIA partnered with Urbis to quantify the risks to the economy from
lower immigration and population growth, and its implications for housing markets and the economy.
The headline findings included:
● Australia's total population growth will be 32 percent lower than previously anticipated from
2020 to 2025;
● Net Overseas Migration accounts for 56 percent of Australia's total dwelling demand, with natural
domestic population increases accounting for 44 percent;
● An average per annum reduction of over 50,000 homes per year will occur in the number of new
homes being constructed over the next five years, with a larger reduction in the first three years
due to the aforementioned population settings;
● $17.9 billion less direct gross value added (GVA) being contributed to the Australian economy
between 2020 and 2025 from the loss in construction.
The Urbis research also shows that even with the fall in NOM, there remains strong levels of residual local
demand to sustain a level of construction activity, jobs and activity, including:
• 45,600 additional detached dwellings required by 2025
• 100,000 additional semi-detached dwellings required by 2025
• 171,700 additional attached dwellings required by 2025.
UDIA appreciates that at the time of our September submission, the implementation of HomeBuilder was
still in its early phases and the Commonwealth would rightly want to assess its effectiveness as greater
take-up occurred.
2Simultaneously, UDIA commissioned ‘real time’ data and insights from industry participants – both to
establish the state and trajectory of the market, as well as test the need for an extension and redesign of
HomeBuilder.
Four Key Takeaways from Industry Research
• 55.3 percent of respondents saw their average monthly sales decline in the period from
March-May 2020 (at the time of the initial COVID19 lockdowns), compared with the prior six
months. Another 19.5 percent stagnated
• 91.4 percent of the industry saw an increase in average monthly sales from June to
September 2020 once HomeBuilder was announced – including over half of all respondents
enjoying a jump of more than 50 percent
• The industry on balance expects to sustain sales for the balance of calendar year of 2020 due
to the upside of the Government’s stimulus measures
• Absent a continuation of HomeBuilder, almost 66 percent of the industry anticipate a
significant drop in sales volumes in 2021.
In summary:
UDIA believes that a scenario in which housing construction stalls in 2021 represents a strong risk to the
nation’s broader economic prospects.
The significance of these findings is reinforced by the scale and importance of the housing and
construction sector’s role in fuelling economic activity. Independent research undertaken by EY on behalf
of UDIA in 2019 found:
• 7.5 percent of the nation’s economic output was generated by development construction (and
this was higher at the peak of the construction cycle
• 750,000 direct and indirect jobs were created in F18-19 from new housing and construction, and
• The combination of direct and indirect output from new housing and construction alone equalled
a mammoth $312 billion in economic output.
That is why UDIA encourages the Federal Government to unveil funding for a further tranche of its
successful HomeBuilder scheme, broaden its application and timeframes to capture a wider spectrum of
housing typologies and ensure there are smooth transitional arrangements to sustain the industry,
allowing stimulus of local demand to make up part of the shortfall from reduced migration.
UDIA’s recommendations are summarised overleaf. We look forward to discussing the findings of the
report further with you.
3Recommendations – Extending and Redesigning HomeBuilder
HomeBuilder has been a public policy success. It has pulled forward demand for new housing and in doing
so, triggered a wave of jobs, wages and activity essential to temper the loss of economic growth during
the second half of 2020.
The challenge remains though given subdued net overseas migration and population growth will linger
well into 2021 (and arguably beyond). These trends will exact a broader economic cost, as well as dampen
demand for new housing.
However, there is still robust residual domestic demand for new housing construction that can be
harnessed to support Australia’s economic recovery. A second tranche of funding for HomeBuilder will
have a positive and powerful effect and the building industry still has capacity to absorb and meet
additional demand.
It will also work well in partnership with the Government’s First Home Loan Deposit scheme inclusive of
its recent amendments, which had already helped to lift industry optimism (recognising that approvals
and development pipelines were slowing pre-COVID).
That is why in our September submission on HomeBuilder 2.0, UDIA National made a series of
recommendations to extend and redesign the scheme to maximise its impact and boost construction, jobs
and activity.
Allocation
Allocating an additional $1.25 billion funding stream to support the construction of 50,000 new homes
with an anticipated economic stimulus of at least $3billion into the Australian economy.
Timeframes
Adjust the timelines applying to the scheme to provide greater participation by apartment, townhouse
and land development projects that more appropriately mirrors housing demand within Australia by:
• Extending the timeframes for building contract signing (or split or two-part contracts) or sales
contracts (for 1-part contracts) to be entered into from December 31, 2020, by six months to
June 30, 2021
[this would also enable a more orderly house contacting and construction timeframe for
builders as many have or are approaching the stage of “”closing their books” as they may not be
able to guarantee contract execution by 31st Dec, 2020 given consumer finance approval and
contact execution timeframes]
• Redefining ‘commencement’ to allow for flexibility which accounts for differences in staging and
timing for detached, semi-detached and attached housing products
• Extending the construction timeframes, depending on the nature of the project, with:
o Detached housing to have a new commencement timeframe of December 31, 2021
o Semi-detached and attached housing (ie: townhouse and apartment projects) to have a
new commencement timeframe of December 31, 2022.
4Price and thresholds
Amending the definition of house and land prices thresholds to remove land costs and in doing so,
provide parity between new housing construction and renovation projects.
Increase the income thresholds of the scheme to capture a wider range of buyers, given the current
limits reflect an approach largely tailored to first home buyers who make up a small fraction of overall
demand.
Land lease communities
Providing for the construction of manufactured homes to be used in land lease communities to be
captured by the scheme, recognising their current exclusion due to requirements around certificate of
title.
Victoria
Extend the current gran’s availability from December 31, 2020, for a further six months and allow for a
subsequent extension of the start of the construction phase for a further six months in recognition of
the effects of the severe, extended lockdown.
Transitional arrangements
To ensure there is no dislocation in the market, any new arrangements to the scheme’s application
should be applied immediately from the date of announcement (rather than a latter date, which would
risk seeing homebuyers freeze or delay decisions).
5THE SURVEY
In October 2020, UDIA National commissioned a survey of industry members via our state divisions to test
the state of the market, benefits and effects of HomeBuilder, and future trajectory of the market.
The survey was designed to provide ‘real time’ data from across development and building companies for
insights into the state and trajectory of the market, as well as the case for the redesign and extension of
HomeBuilder.
The survey was completed by 47 member companies – spanning land subdivision, medium density, and
apartment developers, as well as detached home builders. The survey participants come from a range of
small, medium and large developers across the country, accounting for the construction of an estimated
24,340 new lots/dwellings in the 2020 calendar year.
Respondents included representatives from each of the five mainland states, as well as the Northern
Territory.
Participation Breakdown*
Land subdivision 33
Townhouses / Medium Density 14
Multi-unit / High Rise Apartment 13
Builder (detached dwellings) 7
TOTAL 47*
*NB: Some nominated two categories, where their business activities were evenly split
Victoria 14
South Australia 8
NSW 11
Queensland 10
Northern Territory 4
TOTAL 47*
We also note there were also 27 respondents from Western Australia – whom are not incorporated in the
national survey results.
The WA Government has been unique in providing substantial additional stimulus through its Building
Bonus grants with it being the sole state to respond positively to the Commonwealth’s call to undertake
‘heavy lifting’ in reviving the economy via home construction.
6The presence of the Building Bonus grants gives the WA housing market and industry a distinct and
separate trajectory from the rest of the nation – both during 2020, and into 2021.
As a result, UDIA excluded WA’s results from the main part of the survey and as such, we have provided
its specific results in the appendix to the main report.
7THE FINDINGS
HEADING INTO COVID . . .
A clear majority of the industry saw average monthly sales collapse during the onset of
COVID-19 and economic and health restrictions that accompanied the commencement of the
pandemic.
How did your average monthly sales (not enquiries) perform in the period from March to May 2020,
compared with your average monthly sales in the six months prior (September 19-February 2020)?
Down by 5-20% 10.6%
Down by 21-50% 28.6%
Down by >50% 17.0%
DOWN – TOTAL 56.2%
Up by 5-20% 8.5%
Up by 21-50% 12.8%
Up by >50% 4.2%
UP - TOTAL 25.5%
NEUTRAL 18.3%
TOTAL 100%
8AFTER HOMEBUILDER KICKED IN . . .
An overwhelming majority of the industry saw a significant boost to sales volumes once
HomeBuilder was announced on June 4 – with more than half of all participants recording
an increase of 50 percent or greater
How did your average monthly saves (not enquiries) perform in the period from June to September
2020, compared with your average monthly sales for March to May 2020?
Up by 5-20% 19.2%
Up by 21-50% 17.0%
Up by >50% 55.3%
UP – TOTAL 91.5%
Down by 5-20% 6.4%
Down by 21-50% 0%
Down by >50% 2.1%
DOWN - TOTAL 8.5%
NEUTRAL 0%
TOTAL 100%
9SUSTAINING THE INDUSTRY THROUGH 2020 . . .
A majority of the industry is poised to sustain positive or neutral growth for the rest of
2020 thanks to the presence of HomeBuilder
How do you anticipate your sales volumes will perform for the remainder of 2020, compared with
June to September 2020?
Up by 5-20% 23.4%
Up by 21-50% 8.5%
Up by >50% 8.5%
UP – TOTAL 40.4%
NEUTRAL 17.0%
Down by 5-20% 23.4%
Down by 21-50% 19.2%
Down by >50% 0%
DOWN - TOTAL 42.6%
TOTAL 100%
10FUTURE EXPECTATIONS ARE PESSIMISTIC . . .
The vast bulk of industry participants expect a significant drop in sales volumes in 2021
without an extension of HomeBuilder
How do you anticipate your sales volumes will perform in the 2021 calendar year, compared to the
2020 calendar year (assuming no extension to HomeBuilder?
Up by 5-20% 4.3%
Up by 21-50% 2.1%
Up by >50% 0%
UP – TOTAL 6.4%
Down by 5-20% 19.2%
Down by 21-50% 38.0%
Down by >50% 8.5%
DOWN - TOTAL 65.7%
NEUTRAL 27.9%
TOTAL 100%
11CONSTRUCTION AND APPROVAL PIPELINES TO SLOW . . .
The industry expects a noticeable drop in the construction and approvals pipeline without
an extension of HomeBuilder
Industry participants were asked to forecast the number of dwellings or lots to be commenced in each
of the 2020 and 2021 calendar years (assuming no extension to HomeBuilder in 2021)?
CALENDAR YEAR 2020
24340 NEW LOTS OR DWELLINGS
CALENDAR YEAR 2021
21794 NEW LOTS OR DWELLINGS
Industry participants were asked to provide the number of lots and dwellings currently awaiting
planning approval prior to the end of the 2020 calendar year – and how many they anticipate
submitting for approval in the 2021 calendar year (assuming no extension of HomeBuilder)?
CALENDAR YEAR 2020
7627 DWELLINGS OR LOTS AWAIT APPROVAL
CALENDAR YEAR 2021
6073 LOTS TO BE SUBMITTED FOR APPROVAL
12CAPACITY STILL EXISTS ACROSS THE INDUSTRY . . .
Despite the surge in activity due to HomeBuilder, there is still headroom among building
companies to take on more work – with only 20% having reached or nearly reaching the
capacity limit under their Homeowners Warranty Insurance.
Industry participants were asked:
- If their business was near capacity or currently capped under Homeowners Warranty
Insurance limits?
80% - NO
20% - YES
- If yes, when they expect to be able to execute new contracts and take on more projects?
40% - BY NOV-DEC 2020
40% - BY JAN-MARCH 2021
20% - BY JULY-DEC 2021
19168 NEW LOTS OR DWELLINGS
- If not capped or near the cap, do they anticipate reaching their cap before the end of
2020?
86.7% - NO
13.3% - YES
13A snapshot of Western Australia
As outlined earlier, the availability of the Western Australian Government’s Building Bonus grants acts as
a powerful and unique complementary stimulus measure alongside HomeBuilder.
Western Australia has been alone in reinforcing and supporting the objectives of HomeBuilder and UDIA
is continuing to press the case with other state governments that they should be unveiling their own
stimulus measures – rather than leave the heavy lifting solely to the Commonwealth.
In WA, the survey had 27 participants – a mix of large metropolitan and regional developers that span the
full spectrum of housing markets, ranging from detached to multi-unit housing.
However, there are headline findings still relevant to the future of HomeBuilder:
• The industry experienced a slump in construction during the March 2020 quarter – with lots
under construction falling by 29.4 percent – as the economic effects of COVID-19 began to prevail
• The industry experienced a 122.9 percent increase in sales in the June 2020 quarter (from a low
base), as the stimulus initiatives kicked in – or a 167 percent year-on-year increase
• The total reported lots under construction (and due for release within six months) surged by
188.8 percent during the same quarter to 3050
• Current construction commencements during Calendar Year 2020 are on average 5-20 percent
higher than previously forecast.
14About UDIA
UDIA is the development industry’s most broadly representative industry association with more than
2,500 member companies – spanning top tier global enterprises and consultants to local governments
and small-scale developers.
UDIA has a long history of engaging positively with the Federal Government and its agencies on issues
critical to the property industry – spanning tax, population, infrastructure and land use planning.
UDIA advocacy is defined by our state-representative National Council and informed by a diverse
membership base, extensive network of state councils and committees and businesses on the frontline of
housing and city development around the country.
Our voice is backed by real experience and quality research designed to support good policy making and
dialogue with governments, oppositions and the bureaucracy.
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